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EU and G7 start work on Marshall Plan for Ukraine's reconstruction

A conference of experts hosted by German Chancellor Olaf Scholz as the current G7 chair and European Commission President Ursula von der Leyen laid the groundwork for such a programme in Berlin.

Published October 25,2022
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The Group of Seven (G7) leading industrial democracies and the European Union on Tuesday started work on a reconstruction fund for Ukraine based on US economic aid for Europe after World War II.

A conference of experts hosted by German Chancellor Olaf Scholz as the current G7 chair and European Commission President Ursula von der Leyen laid the groundwork for such a programme in Berlin.

Questions remain surrounding timing however, with Ukraine anxious to begin immediate investments, while the EU seeks to rally more international support for reconstruction efforts.

No concrete financial commitments were made at the expert meeting, which was deliberately not designed as a donor conference.

Ukrainian President Volodymyr Zelensky called for rapid international investment in the reconstruction of his war-torn country in his address, according to a simultaneous translation.

More than a third of Ukraine's energy infrastructure had been destroyed by Russian missile attacks and this part of the recovery cannot be postponed until after the war, he said.

Ukraine needs money now, and the reconstruction fund being considered by the G7 countries must begin its work as early as next month, Zelensky said.

He said €38.4 billion ($38 billion) would be needed to balance the state budget in the coming year.

Zelensky stressed that investments in hospitals, schools, transport routes and other vital infrastructure are particularly urgent.

The conference heard comparisons with a Marshall Plan for Ukraine, referring to the massive US investment in Germany and other Western countries after World War II.

Scholz spoke out in favour of such a programme, describing the investment as "a generational task that must be started now" while Russia's war on its neighbour continues.

The German chancellor was repeating calls made with von der Leyen in an essay published by the Frankfurter Allgemeine Zeitung newspaper last week.

Von der Leyen said that Ukraine needs the help of a global alliance to recover after the Russian invasion, telling the conference: "We need all hands on deck."

Russia has inflicted damage on Ukraine estimated to be €350 billion, von der Leyen said, citing the World Bank. "That is more than one country or one union can provide alone," she said.

The commission president repeated calls on the United States, Canada, Britain, Japan, South Korea, Australia, New Zealand and international institutions to assist.

"There is now talk of unbelievable sums, but in reality no one can yet say exactly how much money will be needed, because it will also depend on how much more is destroyed, unfortunately," German Development Minister Svenja Schulze said.

Schulze called for a mechanism to force Russia to contribute to the costs of reconstruction in Ukraine.

"At the moment, there is no international law to make such a thing possible," Schulze told German broadcaster RTL/ntv ahead of the conference. "I would find it very sensible if Russia were also called in."

Polish Prime Minister Mateusz Morawiecki said the frozen assets of Russian oligarchs - seized by Western sanctions over support of the Ukraine war - should be used for financing the country's recovery.

Ukraine's reconstruction needs to be embedded on the country's path to join the EU, von der Leyen said, adding the bloc is ready to support the country "as long as it takes."

"Europe can only be thought of together with Ukraine," Zelensky said, stressing any investment in the reconstruction of the country invests in a future EU member state.

The commission president also said Ukraine needs €3 to €5 billion a month for the coming year and that the EU should take over one third of the country's financial needs.

Altogether this support would be €1.5 billion for every month of the war and amount to €18 billion in 2023 in direct budget support she said.

Von der Leyen also called for a reliable financing mechanism and for the US to match EU funding with a similar amount as well as contributions from the International Monetary Fund (IMF).

Ukrainian Prime Minister Denys Shmyhal said Ukraine had lost around 45% of its economic output this year.

In addition to reconstruction, the talks also focused on military support for Ukraine. Scholz again promised to continue supporting Ukraine militarily as well. "In its struggle for freedom, independence and sovereignty, Ukraine is not alone," he said.

Shmyhal also expressed his gratitude for Germany's military support, especially for the Iris-T air defence system, which can protect an entire major city.

He stressed that Ukrainian forces needed more weapons and ammunition to win the war.

"We need tanks from our partners, from all our partners, we need armoured vehicles, we need additional artillery," he said.